Towards inclusive European CSR policy: Analysing the impacts of the EU corporate sustainability directive on LDC trade

In 2022, the European Commission adopted the proposal for the corporate sustainability due diligence directive to advance the green transition and protect human rights in the EU and beyond. The proposed new directive would compel EU companies of substantial size and economic power, as well as companies in identified high-impact sectors that operate in the EU to identify, prevent and mitigate the adverse impacts of their activities on human rights and the environment. This study draws from the literature on corporate social responsibility in global value chains, non-tariff measures, and inclusive trade, as well as insights from the Ethiopian garments industry and the Tanzanian coffee sector to analyse the potential impacts of this directive on least developed countries’ value chains and trade with the EU. Although the directive only directly applies to larger companies operating in the EU, this study highlights the likelihood of the directive’s far-reaching impacts on small-scale suppliers, smallholder farmers, workers, and communities in the least developed countries. The study offers recommendations to address the shortcomings of the directive as well as the accompanying measures to European governments to minimise unintended impacts and promote inclusive trade between the EU and least developed countries.